AER shuts down all Lexin Resources operations

Alberta Energy Regulator has no confidence in Calgary oil and gas producer can operate safety

February 16, 2017
The Canadian Press
by Dan Healing

CALGARY — The Alberta Energy Regulator is taking the unusual step of shutting down all Lexin Resources operations, accusing the Calgary-based oil and gas producer of ignoring orders and regulations for months.

Lexin was ordered to shut down its estimated 1,660 sites, including 1,380 wells and 201 pipelines across the province.

“The AER has very little confidence in Lexin’s ability to conduct their operations safely and we’re taking measures to prevent any increase in public safety, environmental or financial risk,” said Mark Taylor, senior vice-president of the regulator’s closure and liability branch.

Lexin officials did not respond to requests for comment.

Taylor said AER field inspectors are paying special attention to 16 sour gas wells Lexin was operating just south of Calgary because of their proximity to the city. He said there is no present danger to the public.

Taylor said the AER doesn’t know how much oil and gas Lexin is producing because the company’s last reliable reports were filed nine months ago.

According to the regulator, Lexin owes more than $1 million in levies to the Orphan Well Association, which reclaims wells left by owners who can’t or won’t clean up depleted sites. The AER said the company also owes more than $70 million in security for its reclamation obligations.

The regulator said it has asked other operators with working interests in Lexin’s licensed operations to secure and shut down those sites. The Orphan Well Association has been asked to shut down the sites where Lexin has no partner.

Association chairman Brad Herald said Alberta’s orphan well total will jump from the current tally of 1,590 awaiting abandonment and cleanup. But it should be a temporary rise of six months or so because productive wells will either be returned to Lexin or sold by the AER to other operators.

Herald said he estimates the cost of caring for the Lexin wells will be somewhat less than $1 million this year.

An AER environmental protection order was also issued to Lexin requiring it to address issues at its Mazeppa sour gas plant 65 kilometres south of Calgary.

The regulator said Lexin only partly complied with an order to shut the plant down last August after it laid off all but six of its staff. The AER said all wells feeding the facility have been shut off.

Andrew Read, a senior analyst for the Pembina Institute, an environmental group, said he applauds the AER’s order but added that it should move more quickly and administer financial penalties.

“I would like to see faster enforcement of breaches of these licence conditions because it does have an impact to, ultimately, what the liability is to the public,” Read said.

Taylor said Lexin asked the AER in January to allow it to designate its sour gas wells as “orphans” because of its poor financial condition but allow it continue to operate its other assets, a suggestion that was rejected.